Citigroup Global markets Inc. (C) has consented to pay $2M to settle claims by the state of Massachusetts that a research analyst improperly disclosed information about Facebook (FB) before the company’s initial public offering. According to Secretary of the Commonwealth William F. Galvin, the financial firm neglected to supervise this person, who allegedly gave research information to a media technology site. Galvin says that this disclosure violated state securities laws, a nondisclosure arrangement between Facebook and Citigroup, and FINRA and NASD rules. While Citigroup has admitted to the statement of facts, it has not denied or admitted violating SRO rules and securities laws.
Per the allegations In re Citigroup Global Markets Inc., Mass. Sec. Div., the junior analyst emailed the information to AOL Inc.-owned media site TechCrunch. The data contained projections by a senior analyst about the IPO. Citigroup is accused of not detecting or preventing the disclosure until responded to a subpoena issued by Massachusetts. Also implicated in the order was a senior Citigroup analyst accused of giving data about YouTube Inc. revenue estimates to a French magazine without getting the communication approved first.
The Facebook IPO in May has attracted a lot of attention from regulators and lawmakers. One reason for this is allegations that analysts gave certain investors select data about the offering. There was also the problem of technical glitches that arose when trading began. Securities lawsuits and congressional and regulatory probes ensued.
To compensate investors that suffered losses from the technical snafus, Nasdaq Stock Market LLC is proposing a $62 million reimbursement fund. Now, the Securities and Exchange Commission is asking for more comment about this proposed fund. As of October 26, most of the 11 letters it had received had voiced objections. For example, some took issue with the $40.527 benchmark price that was used to figure out how much members are owed, while others didn’t like how only a limited number/kinds of orders are eligible for compensation: sells that were priced at $42 or under that failed to execute, sales in this price range that were executed at a lower price, purchases priced at $42 that went through but weren’t confirmed right away, and purchases at the same price that not only went through and weren’t confirmed but also efforts were made to cancel them. Qualified market participants wanting to take part in the compensation program would have to relinquish other related claims that might also be valid.
Citi fined $2 million over Facebook IPO, fires two analysts, Reuters, October 26, 2012
More Blog Posts:
Citigroup Inc. CEO Vikram Pandit Resigns, Institutional Investor Securities Blog, October 16, 2012
Citigroup Inc.’s $590M CDO Putative Class Action Settlement Gets Preliminary Approval from District Court, Stockbroker Fraud Blog, September 13, 2012
Massachusetts Commonwealth Secretary William Galvin Sues UBS for Fraud, Stockbroker Fraud Blog, June 30, 2012
Shepherd Smith Edwards and Kantas, LTD, LLP is a securities fraud law firm that represents investors throughout the US.